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"Guanxi",an important Chinese business element

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  • Hai Yang
    Dear members, Guanxi is an important Chinese business element and it literally means relationships , standing for any type of relationship. In the Chinese
    Message 1 of 1 , Aug 1 2:00 AM
      Dear members,

      Guanxi is an important Chinese business element and it literally means "relationships", standing for any type of relationship. In the Chinese business world, however, it is also understood as the network of relationships among various parties that cooperate together and support one another.

      The importance of "Guanxi"

      The correct "Guanxi" is so vital to any successful business strategy in China. By getting the right "Guanxi", the inevitable risks, barriers, and set-ups you’ll encounter in China will be minimized. Although developing and nurturing the "Guanxi" in China is very demanding on time and resources, the time and money necessary to establish a strong network is well worth the investment. What your business could get in return from the favors for your partners are often more much more valuable, especially in the long run, and when you’re in need.

      How business is conducted

      The Chinese culture is distinguished from the Western culture in many ways, including how business is conducted. For example, the Chinese prefer to deal with people they know and trust. On the surface, this does not seem to be much different from doing business in the Western world. But in reality, the heavy reliance on relationship means that western companies have to make themselves known to the Chinese before any business can take place. Furthermore, this relationship is not simply between companies but also between individuals at a personal level. The relationship is not just before sales take place but it is an ongoing process. The company has to maintain the relationship if it wants to do more business with the Chinese.

      How relationship is established

      First of all, it does not have to be based on money. Treating someone with decency while others treat him/her unfairly could result in a good relationship. Second, it starts with and builds on the trustworthiness of the individual or the company. If a company promised certain things and delivered as promised, the company is showing trustworthiness and the Chinese would be more inclined to deal with them again. Third, being dependable and reliable definitely strengthens the relationship. Fourth, frequent contacts with each other foster understanding and emotional bonds and the Chinese often feel obligated to do business with their friends first.

      "Guanxi" or relationship with high rank officials are still important for doing business in China, though declining to some extent. Political and administrative interference in business have declined. Since "Guanxi" and relationship could function as an information network, companies with wide "Guanxi" and relationship networks often have much higher performance than companies with little or no relationship with the Chinese.

      Final Words on "Guanxi"

      Keep in mind that "Guanxi" can take on many forms. It does not have to be based on money. It is completely legal in Chinese culture and not regarded as bribery in any way. So, there is no need to feel uncomfortable about it. There are risks with this system, as well. When something goes wrong, the relationships are challenged, and friendships quickly disappear. "Guanxi" can also be very one-sided. When "Guanxi" is involved, there is a risk of obtaining an invoice of twice the amount that you bargained for.


      Best regards,
      Crystal Kong
      Consultant of International Department

      SBCS President: Hai YANG



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